tv Nightly Business Report PBS February 22, 2011 6:30pm-7:00pm PST
>> susie: oil prices gush to two-and-a-half year highs, as violence ratchets up in libya. traders are worried the unrest will spread. >> there's some sort of domino effect that could possibly happen, and if there's problems with saudi arabia, that could really affect the market. >> tom: paying higher prices to fill your tank, and investment plays as oil heads higher-- from the pump to your portfolio. you're watching "nightly business report" for tuesday, february 22. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. a sharp stock market sell-off today on worries about skyrocketing oil prices. tom, the escalating crisis in libya pushed crude prices here in the u.s. close to the $100 a barrel level, and all the major stock averages tumbled. >> tom: susie, some oil traders are concerned a civil war in libya could stop oil flowing there. that country is responsible for 3% of the world's oil supply. in new york trading, expiring march crude futures surged $7.37
to $93.57. that's the highest close in two and a half years. the reaction on wall street-- the dow tumbled 178 points, the nasdaq lost 77.5, the s&p 500 was off 27.5 points. >> susie: and american consumers are already feeling pain at the pump. at this manhattan gas station, prices are closing in on $4 a gallon. while libya is thousands of miles away from 51st and 11th avenue, political unrest there and in the middle east is affecting american consumers. oil trader ira ecksteen says the concern is that turmoil in big oil-producing nations like libya could disrupt daily supply. >> libya is the number eight largest, in terms of opec countries, and taking 1.6 million barrels off the market, and having it done in a hurry-- it's going to be a while, or it's going to take some time for them to put that kind of oil on the market.
>> susie: traders say if supply worries persist, crude oil prices could easily climb well above $100 a barrel in the coming days and weeks. higher crude costs have already fueled an increase in the price of gasoline at u.s. pumps. today, regular unleaded averaged $3.20 a gallon; a year ago, it was selling for $2.60 a gallon. but it's still a long way from 2008 highs, when crude came close to a record $150 a barrel and gas averaged well above $4 in some areas of the u.s. oil analyst sam margolin says the big wild card in global oil markets right now is whether the middle east turmoil spreads to saudi arabia. >> that's when concerns would really start to fuel about a shortage-- not just in europe, which counts on the libyan production more than anybody-- but in the u.s., as well, to which saudi arabia is a real important trade partner >> susie: what would political unrest in that nation do to prices?
>> ha! how much? you're looking a ten million barrels a day. you guys tell me. that's a lot. i'm not saying that could happen, but the thought that it could would send futures higher. >> susie: still, there is some good news about domestic crude oil supply here in the u.s. in the last few years, it's grown nicely. >> not that many people are aware of that. but our production in texas and in north dakota and other key producing regions in the middle part of the united states has really kept a lid over prices at the pump that we've seen here, versus what you might expect based on crude prices overseas. >> susie: oil analysts say gas prices would have to get to $4.50 a gallon before they would have a significant impact on our economy. we'll have more about rising oil prices and investment opportunities in oil in tonight's "word on the street." dan dicker joins us with what
oil stocks to avoid, and which ones could be winners as prices head higher. >> tom: here are the stories in tonight's "n.b.r. newswheel." december marked another down month for u.s. home prices. the s&p case-shiller index shows prices fell 1% from november in the 20 big cities it tracks. one of the index's founders, economist robert shiller, thinks prices could fall as much as 25% more. still, consumers are feeling better, as prospects for jobs and the economy pick up. confidence hit a three-year high this month, rising to just over 70. anything above 90 signals a stable economy. budget protests continue around the nation. in indiana, democratic lawmakers left the state house rather than okay a law letting workers opt out of unions, while teachers and other state workers in ohio and wisconsin continue to protest plans to end collective bargaining for state employees.
still ahead-- walmart's u.s. business is struggling. sales have fallen for seven quarters. what does the giant retailer need to do to turn things around? that's in tonight's "market focus." >> susie: we told you about rising oil prices earlier in the program. but they're not the only global concern. food prices are also near record levels, and that means hunger and the risk of unrest are rising in many countries. for some perspective on this crisis, our washington bureau chief darren gersh spoke with world bank's managing director, ngozi okonjo-iweala. >> the world bank recently used the word dangerous to talk bob the level of food prices around the world. define dangerous. >> we really believe we're in a kind of danger zone now with these volatile and rising food prices because we see an extra 44 million people who have been turning to extreme poverty as a result of the rise in prices. this is on top of
900 million people who are already going to bed hungry. >> when you say food has risen to dangerous levels, what does that mean in terms of people's incomes and what they're experiencing? >> many poor people in developing countries spend 50% to 66% of their income on food. so when the price of food rises like this, it means real tradeoffs. it is not a question of: do i eat this cut of meat or a poorer one? it's a question of: do i even have three meals a day, or one or two. we find that people drop meals, you know, when these prices rise. and that children, you know, are malnourished. they don't get what they need. >> oil prices have spiked. they're over $100 a barrel. farmers use a lot of oil to make their crops. what impact will that have if those prices stay up
like that? >> we've seen the link between oil prices and food prices. and the fertilizers link into it. that raises the cost for farmers. but one important thing is that beyond the price rises, is the uncertainty of the volatility of prices. the oil prices go up one day and down another, and farmers find it difficult to deal with this uncertainty. >> as i understand it, the food price increases are not takingplays place all over the world. some parts of the world are doing well, africa, for example. can you give us a sense of what the different regions of the world are seeing in terms of food prices. >> yes. let me start with africa. there is a reasonably good story there. last time we had the food price spike in 2008, so many african countries were affected. but there are good har vests, like in ma malawi, and
this has helped to mitigate it impact. but in central asia, we have a problem. the price of wheat is up 54% from a few months ago. bangladesh, up 45%. you know, so in many parts, central asia has been hard hit. >> americans sitting home hearing all of this are wondering what can or should be done about all of this? if it is weather, do you just wait for better weather? if it is policy, what policies need to change? >> that's one thing. and bob zellick, the president of the world bank has really spoken about this first. it sometimes happened there is no food shortage worldwide. some countries have a surplus where other countries have a deficit. but we don't have information on stocks. often it is not
transparent -- we don't know who has what and who doesn't have. so if we can get more transparency on food stocks, we can can move the food. two, we can cushion the vulnerability. and three, we have to help farmers with seed and fertilizers, to help them improve their productivity and in the long-term, we need to invest more in food security. >> ngozi okonjo-iweala, thank you for your time. >> thank you very much. a pleasure. >> tom: president obama headed to the heartland today, listening to small business owners at a cleveland, ohio, forum. calling them the backbone of the american economy, the president asked for their ideas on how uncle sam can make it easier for small businesses to grow. the president said, "when our small businesses do well, america does well." >> you're the anchors of our main streets-- small businesses built by folks who live and work
in the community and look out for one another that end up determining success or failure of cities and towns. >> tom: president obama also used today's event to announce a.o.l. co-founder steve case is joining the new jobs and competitiveness panel. case will lead the start-up america partnership promoting entrepreneurship. >> susie: citigroup shares tumbled almost 5% today, the
most active stock on the big board. investors sold shares on word that the trustee for victims of bernie madoff's fraud has targeted citigroup. in a suit filed in december but unsealed this week, trustee irving picard claims citi ignored red flags on madoff's fraud. picard said, "armed with public and considerable non-public information about madoff, citi knew or should have known of possible fraud at madoff's investment advisory business". citi said it will vigorously defend itself against the trustee's claims. tom, as you know, citi's not the only big bank picard is targeting. he has also sued j.p. morgan chase and bank of america's merrill lynch unit. and both of those stocks were also down sharply today. >> there wasn't much that was not down sharply today. all of the 10 major s&p stock sectors were in negative territory by the closing bell. let's go ahead and get folks updated with
tonight's "market focus." >> tom: stock investors were greeted with a stiff sell-off after the long president's day weekend. stock prices dropped, volatility jumped, and bond interest rates fell as prices rose. let's start with today's trading of the s&p 500. we spent the entire day in negative territory as stock prices continued falling through the afternoon. since december 1, the index has seen an almost uninterrupted bull run, representing a 14% jump before today's sell-off. today's drop in stocks brought with it a pop in fear. the chicago board options exchange volatility index measures market near-term expectations.
a falling fear index corresponded to the stock rally. the jump today brings it to its highest level of the year. with the stock weakness, money found its way into bonds, pushing the yield on the ten- year note down below 3.5%. yields have been rising since the federal reserve launched its bond buying efforts in november. stocks may come under additional pressure tomorrow after hewlett- packard's numbers were released after the close tonight. this is the first complete quarter for c.e.o. leo apotheker, who took over after a scandal involving former boss mark hurd. apotheker described consumer demand as weaker. revenues reflected that, as they came in lighter than expected. h-p-q stock was down slightly during the regular session, but fell more than 7% after the close.
if that selling holds, it would take shares below the low last month, and back below the price they were at when the c.e.o. scandal broke in august. before the bell, markets were greeted with walmart's fourth quarter numbers, showing better than expected earnings, but that was thanks only to its international stores. u.s. same-store sales fell for the seventh straight quarter. consumer traffic actually dropped during the holidays. deutsche bank senior analyst bill dreher says there are no easy answers for walmart. >> we're very concerned that not only will the economic recovery be slow, but also walmart's ability to change their position will also take some time. we're similarly looking for same-store sales for u.s. stores to be flat to down this year again, after a disappointing year last year. >> tom: walmart fell 3% on the news. volume was twice normal.
the sell-off brings the stock back to prices it saw for the better part of four months late last year. other retail earnings include macy's fourth quarter coming in a nickel better than estimates. its own house brands and exclusive merchandise got the credit. home depot also beat the street. unlike walmart, home depot saw strong growth at its u.s. stores. and it's raised its guidance. still, macy's and home depot fell 1% after their earnings reports. dollar tree may be one to watch tomorrow with its earnings call. one company relying on retail, v.f. corporation, is better known for lee jeans, vans shoes, and north face outdoor gear. the stock took off today, up 7% to a new high. a strong quarter and better outlook helped. we saw amazon.com move in more direct competition to netflix.
amazon started an unlimited streaming video service with 5,000 movies and tv shows. it's for its existing amazon prime customers who already pay $79 per year. both amazon and netflix were caught up in the sell-off today, falling 3% and 6%, respectively. netflix announced a deal with cbs. the energy sector was among the best performing today, thanks to oil prices, but companies using oil saw some selling. delta air lines, carnival cruise ships, and fed-ex each saw stiff selling on heavier volume. and that's tonight's "market focus."
three dozen types drilled from around the world. here in the u.s., when we report oil prices, we're usually referring to what is called west texas intermediate oil. but there is brent crude oil, near the united kingdom, and mars crude is higher sulphur from the gulf of mexico, and the due by mercantile exchange is the benchmark for mideast oil. all of this brings us to tonight's word on the street, crude. dan dicker joins us once again from the nasdaq. welcome back. nice to see you. what price should investors in oil stocks pay closest attention to? >> the one that is most widely publicized, that is
the closest representative to world oil prices is brent crude out of the north sea. the w.t.i. tru t.i. crude has lt connection to every other crude. so what prices you're seeing for w.t.i. has nothing to do with what people pay at the pumps. >> w.t.i. is west texas instruments. >> it has been the bench part for u.s. prices, almost everything has been pricing off w.t.i. off the past 20 years, but they've had this huge reserve point. and its land locked. it has forced the prices much lower than every other grade out there. you've had a lot of financial players who have also piled into this west texas intermediate problem, but haven't been able to get out because of the surplus in the supply
change. you have a lot of oil coming in, and you have this market that is actually trading 15, 20, sometimes $25, where its advertised price should be. >> dan, your sense is real oil prices are well over $100. with that in mind, oil investors have been looking for opportunities. you say avoid oil refiner stocks, lying valaro, to soro, another oil refiner that has been rallying nicely. why do you think the refiners is not the place to be. >> w.t.i. is bases pricing their input costs. but gasoline hasn't been under that restraint. it is delivered to new york harbor. we're paying $3.18, the national average at the pumps. and that is something. so they've gotten this huge margin benefit. sooner or later, the disconnect at w.t.i.,
changes back to the way it once was, and at that point the refineer's party is over. >> in the meantime, you like integrative companies, who drill it and sell it. what makes you like those with the so-called down-stream and up-stream bases, versus those with just the refiner. >> they don't have the same type of restraints on the input and output. they won't be affected by the disconnects. in addition, those energy companies, the big integrated companies, are great proxies for the oil price. that's why they rallied 8% over the last three months. the reason i think you should be in these is because i don't think the crude prices are done going up. a lot of mideast unrest. it will be tougher at the pump going through the spring and the summer. if you want to take advantage of the increasingly rising oil
prices, i think exxon is best to breed there. >> any disclosures or ownership positions? >> i do own exxon, i own it and will continue to own it. >> you can read dan's article on thestreet.com. our word on the street guest, dan dicker, for word on the street. >> susie: here's what we're watching for tomorrow: quarterly results from several retailers including lowe's, saks and tjx, the parent of discounters, marshall's and t.j. maxx. we'll also see existing home sales for january and weekly mortgage applications. hilary kramer is back as our "street critique" guest. send your questions for her to streetcritiquenbr.com. more of toyota's vehicles are under scrutiny by the u.s. government. this time, it's the highlander s.u.v. the national highway traffic safety administration will look at about 44,000 of the vehicles. it's gotten 32 complaints that the 2006 hybrid model is prone
to stalling. in most cases, the s.u.v. would not start and had to be taken in for service. so far, no one has been hurt. >> tom: the man overseeing b.p.'s $20 billion spill fund, kenneth feinberg, is responding to critics. in a court filing, he says the process used to compensate victims has been "nothing short of extraordinary". feinberg says his efforts have exceeded what's required by federal law. but critics say the process is mired in red tape and delays. those unhappy with the fund's progress range from gulf area residents and businesses to lawmakers and b.p. itself.
>> susie: with all the talk of budget numbers and spending cuts in washington, d.c., tonight's commentator is scoffing at both sides of the aisle. he's allan sloan, senior editor at large at "fortune." >> are you getting tired of all the talk about the federal budget? heaven knows, i am, and the debate has barely started. i'm no budget genius, but i know enough to know that most of what were seeing and reading and hearing is nonsense. the obama people pretend to be doing serious budget cutting. but of course, they aren't. the republicans are whacking away at the current budget to cut things they don't like, such
as pell grants to help lower- income people pay for college. but they aren't going near the real problems-- social security, medicare, medicaid, and the defense budget. they say they'll do that in april. i can hardly wait. as for the ten-year numbers floating around, they're total fantasy. the non-partisan congressional budget office makes a point of saying as often as possible that ten-year numbers are unreliable. unlike the republicans and democrats, it tries to be honest. so if you want to agonize over every twist and turn in the budget debate, be my guest. but i'll find something else to obsess over until the numbers start to get a little real. maybe you should do the same. i'm allan sloan. >> tom: that's "nightly business report" for tuesday, february 22. i'm tom hudson. good night, everyone, and good night to you, too, susie. >> susie: good night, tom. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: